Gogging Ltd is a major producer of prefabricated beach houses. The company consists of two divisions: Perth division and Brisbane division. The Perth division's annual performance report follows. It forms the basis of the evaluation of the division and its management.

Balance sheet as at 31 December

Current year

Last year

Assets:

Current Assets

$1,000,000

$800,000

Fixed Assets

$1,915,000

$1,200,000

Total Assets

$2,915,000

$2,000,000

Liabilities:

Current Liabilities

$500,000

$800,000

Long term Liabilities

$2,415,000

$1,200,000

Total Liabilities

$2,915,000

$2,000,000

Performance report for the year ending 31 December

Current year

Last year

Sales Revenue:

$850,000

$950,000

Variable Costs

$505,250

$550,250

Contribution Margin

$344,750

$399,750

Less:Controllable Fixed Expenses

$60,000

$70,000

Profit Margin Controllable by Divisional Manager

$284,750

$329,750

Less:Traceable Fixed Expenses

$140,000

$90,000

Profit Margin Traceable to Division

$144,750

$239,750

Less:Common Fixed Expenses

$60,000

$60,000

Net Profit Before Tax

$84,750

$179,750

Corporate Tax (20%)

$16,950

$35,910

Profit After Tax

$67,800

$143,800

Minimum required rate of return is 20%

The Perth division has the opportunity to add a new product line that would require an additional investment in operating assets of $500,000. The cost and revenue characteristics of the new product line per year would be:

Sales

$1,200,000

Variable cost

60% of sales

Controllable Fixed Expenses

$120,000

Traceable Fixed Expenses

$50,000

Required: (Total Marks: 15)

(i)Calculate the ROI (return on investment) ofthe Perth division to evaluate "divisional manager's performance" for the current year and comment on the manager's performance. Show your calculations.(2 marks)

(ii)Calculate the ROI ofthe Perth division to evaluate "divisional performance" for the last year and comment on divisional performance. Show your calculations.(2 marks)

(iii)Calculate the RI (residual income) ofthe Perth division to evaluate the "divisional manager's performance" for the current year andcomment on the manager's performance. Show your calculations.(2 marks)

(iv)Calculate the RI ofthe Perth division to evaluate "divisional performance" for the last yearand comment on the divisional performance. Show your calculations.(2 marks)

(v)Calculate the ROI ofthe Perth divisionwith the new product line for the current yearand recommend whether the divisional manager should undertake the new product line. Show all calculations and give one (1) reasons for your recommendation.(3 marks)

(vi)Discuss the merits of Gogging Ltd using Economic value added (EVA) to manage organisational performance.(4 marks)